UNDP Poverty Report 2000

Governance Reforms Essential to Poverty Reduction

Economic growth and low inflation combined to reduce income poverty in the Dominican Republic in the 1990s. Unemployment is down significantly, and real wages are on the rise - minimum wages more so than average wages.

Poverty now probably affects about a fifth of the population, according to preliminary estimates from a 1998 survey. Further progress appears contingent on governance reforms that can help translate growth into poverty reduction.

Although the results for different surveys are not comparable, there is general agreement that poverty rose in the recession of the last half of the 1980s. But with the revival of growth from 1992 onwards, it began to decline.

The economic growth of the 1990s does not appear to have dramatically reduced poverty, however. One reason is high inequality: the Gini coefficient of income distribution remained at 0.42 in 1996 (0 indicates perfect equality, 1 perfect inequality). Another reason is that spending on human development has not favoured the poor. A national poverty programme, hampered by implementation problems, is still trying to get off the ground.

Low Social Expenditures

Public expenditures in the Dominican Republic are relatively low - about 16% of GDP in 1998. Social expenditures are also low - about 6–7% of GDP, or half the Latin American average of about 14%. With public expenditures so low, the government has difficulty building effective institutions to provide public services, enforce laws and administer justice. A governance structure deprived of resources has little latitude to reallocate resources to the poor. Citizens cannot expect social justice from a weak state.

During the last half of the 1990s the government began moving to focus spending on the neediest, launching the Decent Community Programme. But it faces obstacles. One is people's scepticism: past experience with structural adjustment policies has led many to believe that such initiatives are motivated primarily by politics.

To build its capacity, the government has concentrated on increasing the salaries of civil servants. Between 1996 and 1998 such salaries increased in real terms by more than 40%. The impact of these reforms on the poor is likely to be no more than indirect. To focus on the poor, the government has to reallocate resources away from organized urban groups, usually not among the poorest.

Historically, social programmes have concentrated on constructing facilities, such as housing, water supply, drainage systems and sports complexes, all in urban areas. In 1989 the government spent 1.8% of GDP on housing but only 0.8% on primary education. The unit costs of the government-built houses were high, few people benefited and those who did were usually the politically influential, not the poor.

But there has been progress. Real social expenditures tripled between 1991 and 1999, with almost half the increase after 1996. In addition, expenditures have been directed more to basic services, which have a greater impact on the poor.

Poverty Reduction as a Central Goal

The new government that took power in 1996 declared poverty reduction one of its main objectives. But apart from maintaining growth with low inflation, it has not yet mounted a full attack. In 1996 it drew up a National Social Development Plan for improvements in such services as education, health and housing. It established presidential commissions to channel resources to neighbourhood development for the poorer areas of major cities and to provincial development to help spur rural prosperity. The idea is to decentralize public management and encourage community participation.

One obstacle: the public's low opinion of past poverty programmes. Take the Community Initiatives Promotion Fund, a social investment fund started in 1993 to deal with the negative effects of structural adjustment. It was launched with great fanfare, but when further external resources were not forthcoming and the political situation improved, the government appeared to lose interest. The fund has become just one more office among many providing social services. Although its projects are supposed to be community driven, few are in the poorer districts of the country.

An overriding problem for poverty reduction policies is that they are held hostage to sectoral policies, such as those in health, education or housing. Thus reducing poverty is not the responsibility of any one government office but the goal of the uncoordinated activities of different ministries.

The Decent Community Programmes

The Decent Community Programme, launched in 1998 to try to correct this situation, remains small and under-funded. Its resources add up to about 0.7% of GDP, and more than half its budget covers the normal expenses of government offices responsible for activities already under way.

The programme seeks to actively engage communities in implementing projects. And to coordinate the activities of public departments, it has set up an Inter-Ministerial Social Committee. Heading this group is the chair of the Presidential Commission for Neighbourhood Development, who has strong links to civil society.

The unfortunate legacy of past programmes is that the public generally sees the programme as a tool of party politics. So civil society organizations have held back from participating. Another legacy is that the Dominican state is still centralized: until recently the central government commanded 98% of public resources. While the government is committed to decentralization, the political situation is complicated by the fact that opposition parties head most local governments. So in today's circumstances broader political consensus and reforms in governance would go a long way to help improve the government's poverty programme.